Fate Therapeutics Trims Chemistry Staff, Bets on Biotech Drugs

7/7/11Follow @xconomy

Fate Therapeutics, the high-profile stem cell startup in San Diego, has made some limited job cuts in recent months and changed strategy to focus on biotech drugs—instead of conventional small molecules—to coax stem cells into becoming a useful therapies.

The company, founded by leading scientists at Harvard University, Stanford University, and the University of Washington, has reduced its staff to about 25 people as it eliminated jobs of a “handful” of small molecule chemists, according to executive chairman John Mendlein. That’s down from about 40 employees a year ago, according to a Fate spokeswoman at the time, although Mendlein says the company headcount was only about 31 at its highest, because some people have been indirectly supported through company-sponsored research grants. Fate’s internal cuts, which came in February, were partially offset by hiring some new people with skills in making biologic molecules, Mendlein says. By dropping the small molecule work, Fate shelved two drug development programs that sought to alter a cell-growth pathway known as hedgehog. The strategic changes all came around the time when CEO Paul Grayson left the company.

“It’s a reshaping from a headcount perspective,” Mendlein says. “We want to emphasize biologics more than small molecules.” He added that Fate may still form partnerships with Big Pharma companies that want to work on small molecules, but the biologics work is considered the higher priority within Fate at the moment. “Biologics are not redundant with what other people are working on. Biologics are proprietary,” Mendlein says.

Fate’s strategic moves are closely watched in the stem cell field, as the company has generated lots of attention since its founding in 2007. It has raised more than $50 million from top venture capitalists and Big Pharma investors seeking to take advantage of stem cell biology to develop new therapies, or to use the new knowledge to enhance drug development. Fate made big news in October 2009 when one of its scientific founders, Sheng Ding, showed in Nature Methods that he could induce ordinary adult cells into a stem-cell-like “pluripotent” state through a combination of cheap, efficient small molecule chemical compounds. The discovery, the company said at the time, was thought to be a key to advancing the field by paving the way for a low-cost, efficient “industrialized” process for making cells with potential to differentiate into other cells.

So far, Fate hasn’t yet secured any lucrative partnerships with Big Pharma companies looking to incorporate its methods for making pluripotent cells for drug development, or to co-develop regenerative medicines. Fate has a secured a distribution partnership with Franklin Lakes, NJ-based Becton Dickinson (NYSE: BDX) in which Becton could end up distributing chemical reagents or Fate’s induced pluripotent stem cells for research.

There is a scientific reason for the shift to biologics, Mendlein says. Conventional small molecule compounds have an advantage in that they can be cheaply and easily synthesized in a lab, but they often bind with lots of similar protein targets rather than exclusively nail just one target of interest. Biologic drugs, made through genetic engineering techniques, can be expensive to make, but they can be designed to hit a specific target, he says.

“We think there’s an opportunity to create small molecules that modulate cell fate,” Mendlein says. “However, small molecule chemistry potentially creates additional complications in interpreting data. They often have off-target effects, and they have a distribution pattern that’s more broad across more tissues. We want to ask more specific questions, which you can with biologics. We can design biologics to manipulate the fate of cells for therapeutic benefit.” He adds that … Next Page »

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